Thursday, April 07, 2011

KYC for mobile banking in emerging markets

The foundation for the implementation of a robust "Know Your Customer" (KYC) system is a trusted, uniform ID document system. The system would typically require a new subscriber to provide a photo ID when opening a new bank account. The details of the ID is then verified and stored as proof that the customer exists and was present when the account was opened.

But what if a uniform ID system does not exist, or if more than one ID system exists? Or what do you do with members of the population that have not yet received their ID documents in countries where issuing of ID documents are slow or inefficient? Or what do you do if a large percentage of ID documents are fraudulent or not trustworthy? This is the case in many emerging markets.

Not having a plan in these situations means that a large percentage of the target market cannot be served, or on the other hand, not having a robust KYC solution could detrimentally impact the basis of the integrity of your system. These are some of the challenges that robust platforms for mobile money must be capable of solving. Solutions usually cater for this by a combination of the following:
  • Catering for multiple different ID document systems on the same platform, building a trusted view of the prospective customer's identity.
  • Providing support for identifying individuals by means of verification by trusted subscribers already registered on the system.
  • Building verification algorithms to discover potential fraudulent registrations and integrating this into the compliance policy.
  • Managing validity terms of ID verification.
The best systems for mobile money in emerging markets are significantly more sophisticated regarding KYC than best practice in first world markets.


Anonymous said...

I can see this developing into an interesting service - albeit virtual. I know in Australia for instance when the first KYC came out you could provide a number of documentation that each had a "value" and when the total surpassed the threshold it was deemed satisfied. This same "function" will undoubtedly occur and be incorporated into mobile. Just as a "credit score" occurs - perhaps there is an identify score provided by a third party service or companies. As long as it isn't hacked (RSA was hacked, ORNL was hacked) - everybody's good. I think back to the CLEAR travel system in the US in which we were able to rapid flow through security lines based on multi-factor authentication. Perhaps there are multiple On-boading authentication methods that must be accommodated based on ones level of "authentication". Then again - they went bankrupt!

Njambi Mbugua said...

KYC will need to be done before the customer starts to transact. the customer would provide the documents required for KYC and then thye get a code or PIN which they can use on thier mobile phones. the mobile phone number is also used to verify the KYC and identity of the customer